The threat of legal action against firms owing money to Birmingham City Council’s planning department has netted £500,000 in unpaid debts.

Scores of companies hit by the recession have been backtracking on so-called Section 106 agreements – cash they have agreed to pay to the council in return for the granting of planning permission.

For major city centre regeneration schemes the payments can run into millions of pounds, with the cash being put by the council towards community projects and improvements to public transport.

Since last year council lawyers have been threatening court action against bad payers.

Regeneration director Waheed Nazir said: “If funds haven’t been received by the due date, the developer is contacted and notified that unless payment is made promptly the city will pursue the matter through litigation if necessary.”

In addition to the £500,000 already recovered, two further cases with a value of £227,000 are being reviewed by the council’s legal services unit.

A further 12 developers have been threatened with legal action.

The council has signed 870 Section 106 agreements since 1990, worth a total of £132 million.

But only £34 million has been received by the city. The remaining £98 million is either on-hold because planned developments have been mothballed or has not yet been paid because building work has not been completed.